Well-paying jobs boost pensions for ex-lawmakers

Aug. 21, 2007

Written by

LILO H. STAINTON

GANNETT STATE BUREAU

TRENTON -- When state Sen. Louis F. Kosco left office in January 2002, acting Gov. Donald T. DiFrancesco -- a fellow Republican who also was Senate president -- helped provide a soft landing.

Well-paying jobs boost pensions for ex-lawmakers Kosco, who represented Bergen County, landed a job as a "project specialist" for the state Parole Board at a salary of $99,825. The position didn't exist and required circumventing a statewide hiring freeze. The job has not been filled since Kosco left, said Michael Dowling, the Parole Board's executive director.

Kosco's one-year stint gave him a huge pension boost -- an increase of more than $20,000 a year. In February of this year, he started collecting an annual pension of $50,814.

Kosco illustrates one of the benefits of the pension system for state lawmakers. Not only have legislators voted themselves a better retirement package than most other state employees, but they also can move around the job system more freely because of their political ties.

"After a period of time, the practice becomes the given standard, and that's what's wrong," said Sen. Peter A. Inverso, R-Mercer, who has introduced a number of pension reform bills. "Service in the Legislature is officially part time, and as a result it was never meant to be a substitute for someone's obligation to fund their retirement benefits elsewhere."

The system works this way: Pensions are based on years of service and the average of the three years with the highest salary (it's the highest single year for military veterans). Over the years, lawmakers granted themselves a pension plan that has a higher percentage payout than that of full-time state employees.

Because Kosco took the Parole Board job, his final pension was based not on his $35,000-a-year senator's job but on an average of the lawmaker and Parole Board salaries. (Lawmakers' salaries rose to $49,000 after Kosco retired from his seat.)

Nearly a third of the 120 members of the Legislature collect income from a county or municipal job, in addition to their legislative pay, which boosts their total annual income. Called tacking, the sum of all their public incomes can send their future pension payments soaring sky-high.

Kosco is hardly alone in reaping larger pension benefits by taking a better-paying public job after leaving the Legislature.

Former Bergen County Assemblyman Nick Felice was named a "legislative liaison" to the Board of Public Utilities for $85,000 a year after losing his re-election bid in 2001. And this spring, Sen. John J. Matheussen, R-Gloucester, left the Legislature to become executive director of the Delaware River Port Authority for $195,000 a year.

The new job nearly quadrupled his pension prospects.

Each lawmaker denied that pension benefits influenced his career moves, but critics say New Jersey's pension system is ripe for abuse.

"It fuels the public's cynicism over the money-grabbing atmosphere that can pervade the halls of government," said Pete Sepp, a spokesman for the National Taxpayers Union, in Washington, D.C. In addition to "double-dipping" -- taking two jobs on the public payroll -- Sepp warned of "super-scooping," inflating pension rates by taking high-paying public jobs after leaving elected office.

"This has no realistic equivalent in the private sector," Sepp said, adding that New Jersey lawmakers are far from the only legislators nationwide to enjoy such enhanced benefits. "It would be like a milkman becoming an electrician, and then getting into accounting and ending up with 30 years' credit."

New Jersey's State Committee of Investigation, an independent agency that probes government waste and corruption, raised similar concerns in 1998. It warned that combining public jobs can "result in huge public pensions for services that were actually performed in the course of private professional practice." The bottom line, the SCI found, "is a drain on the assets of the pension fund."

Now valued at $62 billion, as of July, the state's pension system is funded by workers and taxpayers.

Lawmakers and other state workers contribute a mandatory 3 percent of their base salaries to the fund. On July 1, 2004, the contribution will rise to 5 percent for legislators and most other state workers.

A portion of the pension funds is invested in the stock market. New Jersey is the only state that still internally manages its retirement funds, through portfolio managers and other experts in the Treasury Department's Division of Investment. The system lost $20 billion since 2000, and Gov. McGreevey has hired an outside firm to review the division's efforts.

McGreevey added $146 million to the pension system in the current fiscal year, which began in July, and spread an additional $584 million in contributions to the fund over the next five years. This year's donation came from a combination of general-fund tax dollars and pension money -- tax revenue and employee contributions -- left over in an obscure benefit fund.

New Jersey runs five active public pension systems with a total of 638,894 members. The plans for teachers, judges, local police and fire departments, State Police and state workers -- including lawmakers -- paid out a combined $4.1 billion last year to 193,439 retirees, according to the Treasury Department.

Because the lawmakers' work in Trenton is part time, they are allowed to hold other public jobs with counties, municipalities and school boards that will raise their retirement benefits.

Although state employees must put in 10 years before entering the pension system, or qualifying for deferred payments if they retire before age 55, lawmakers can retire at age 60 regardless of when they were elected and entered the Public Employee Retirement System. They qualify for deferred pension payments after only eight years.

In addition to a monthly check, retired lawmakers get a life insurance policy worth nearly 19 percent of their final year of salary, almost $9,200 for a legislator earning $49,000. Like other state workers, retired lawmakers also receive free health benefits for themselves and their immediate family if they've invested more than 25 years of government service.

A few lawmakers stand to collect multiple pension checks, from different state retirement plans.

Sen. Joseph A. Palaia, R-Monmouth, a former public school principal, receives $29,000 a year from the teachers' plan and will collect a second pension under the legislative system.

Former Assemblyman Jeffrey W. Moran, R-Ocean, who retired in May after serving 17 years, has received since January 2002 a $58,000 annual pension for his 33 years at various positions in the Toms River Regional school district.

Moran was appointed by McGreevey this spring to a job as Ocean County surrogate, which pays $91,650 a year and will add years and dollars to his state pension.

But far more common are legislators who piggy-back municipal and county work on top of their legislative work, sending their combined salaries soaring and boosting their bottom line -- upon which pensions are based.

Sen. Wayne R. Bryant, a powerful Camden County Democrat who co-chairs the Senate Budget and Appropriations Committee, earns $167,000 from four public jobs, including his $49,000 Senate salary.

Bryant has been reluctant to discuss his public jobs with reporters but insists he is a busy man doing public work for the public good.

In Monmouth County, Republican Senate President John O. Bennett III drew a salary last year from three municipalities and a school board that paid him to be their attorney: Marlboro, Hopewell Township, Little Silver, and the Keansburg Board of Education.

Bennett earned $220,360 in salaries, which included the $65,334 he was paid as Senate co-president.

If he stays in the Senate and retires at age 60 in 2008, Bennett would be eligible for a pension of more than $100,000 a year.

"This has been part of my retirement planning from the beginning," Bennett told the Asbury Park Press in January. He was hired to the jobs because of his hard work, Bennett said, not because of his connections in the Legislature.

Bennett has defended the practice of holding multiple jobs at once, saying he usually works seven days a week, including some nights, and donates a portion of his earnings to local charities.

Recent efforts to reform the current pension system, established in 1972, have gained little momentum, despite the SCI's warnings in 1998. Changes now on the legislative agenda would actually increase benefits.

One proposal by Inverso, who is president of Roma Federal Savings Bank and once served as a freeholder, would require legislators who also work as municipal attorneys or engineers to pick one job for their pension designation, not combine salaries from different public positions.

"The public is getting cynical and skeptical about government, and my feeling is we need to address that. We can't put our heads in the sand," Inverso said. "What it does is put a strain on the pension system ultimately."